It should go without saying, but if you are going to file bankruptcy, you must be honest in your filing. There is a rule to follow: bankruptcy fraud, don’t do it! An example of what not to do was recently reported by Robert Anglen, reporter for The Republic/AZcentral.com. Apparently, one John Endres of Cave Creek was the operations manager of a synthetic marijuana manufacturing and distributing company when he filed for personal bankruptcy in 2012. He told the judge that he earned $5,000 a month working for Revolution Distribution and could no longer pay his bills. Before Mr. Endres’ Chapter 7 was discharged, he put $25,000 down in earnest money for a 6,700-square-foot house with a 6-car garage with a purchase price of $1.5 million. After the bankruptcy was discharged, Mr. Endres wired another $288,630 down payment from an account he had set up in another state. Obviously, Mr. Endres failed to disclose to his creditors and the bankruptcy judge that he had more than a million dollars in a secret account. Eventually, he admitted that he and created a shell company where he directed portions of his income, ranging from $2,500-$54,000, every two weeks. As you can imagine, Mr. Endres now has to repay all of his debts as part of a criminal restitution order.
When filing for bankruptcy protection, the debtor asks permission to stop paying their creditors. After careful review of their assets and income, the court will usually agree to discharge (or forgive) their debts, which stops creditors from taking any legal action against the debtor. Any action taken on the part of the debtor to hide assets and income during bankruptcy is illegal and amounts to fraud upon the court. If you commit bankruptcy fraud, not only do you put your bankruptcy at risk, you subject yourself to criminal prosecution, as Mr. Endres found out the hard way. In the end, Mr. Endres was charged with one count of bankruptcy fraud, one count of concealing assets and 10 counts of making false declarations on a bankruptcy petition. He could have received a 5-year prison sentence, but he pleaded guilty to one count of bankruptcy fraud in a plea deal, and agreed to repay all his creditors.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Bankruptcy Fraud, Don’t Do It, or any other Bankruptcy matters, please feel free to contact Joel E. Sannes at 480.461.5307, or log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.